Time Value of Money: The Buy Versus Rent Decision

Name: Time Value of Money: The Buy Versus Rent Decision
SKU: 9B14N024_P

Sean Cleary; Stephen R. Foerster

Product #:9B14N024_P

Supplier:Ivey

Discipline:Finance

Setting:Canada, 2014

Details:Case (PDF) • 2 pages • 2014-08-28 (Rev: 2015-06-05)

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A recent MBA graduate had been renting a condominium, and a similar unit next door had just been listed for sale. Now facing the classic buy-versus-rent decision, the young grad decided it was time for her to apply some of the analytical tools she had acquired in business school — including “time value of money” concepts — to her personal life.

Learning Objectives

To review and provide practical applications of several time-value-of-money concepts.
To provide an understanding of how to estimate cash flows and why opportunity costs can be important.
To introduce students (informally) to the net present value (NPV) framework.
To illustrate the fact that most decisions can be evaluated quantitatively, using time-value-of-money concepts to supplement qualitative considerations.

This case can be used in a variety of contexts – including in a course on Corporate Finance, Financial Management or Real Estate or as an introductory case discussion in an undergraduate or MBA program – to help students to understand time-value-of-money concepts, as well as the practical applications of such concepts.

Time Value of Money: The Buy Versus Rent Decision

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Learning Objectives